Red Oak Realty sues Vanguard alleging broken NDA in merger talks

Red Oak Realty has filed a lawsuit against Vanguard Properties, alleging the Bay Area’s largest independent brokerage engaged in an agent “poaching campaign” using protected information. The suit asks for an unspecified sum in damages as well as a preliminary injunction to stop the San Francisco-based competitor from using “sensitive and trade secret information” gleaned from failed merger talks to recruit more agents from the East Bay-based brokerage.

“Vanguard’s egregious conduct should not be allowed to continue,” according to the injunction motion.

The suit was filed in San Francisco Superior Court last week and lists Vanguard, as well as founder James Nunemacher, co-owner and President Frank Nolan and Oakland office Sales Manager Pamela Hoffman among the defendants.

Vanguard “categorically denies each and every allegation” in the complaint as “unfounded and factually and legally without merit, as we will demonstrate through the vigorous defense of this claim,” according to a statement from Jennifer Supman, general counsel and broker of record for the firm.

Vanguard has a heavy presence in San Francisco, where it was the third-biggest brokerage this year, as well as the North Bay. Recently it has expanded into the East Bay, the market where Red Oak, an independent with a 50-year history, primarily operates.

Information “treasure trove”

Red Oak CEO Vanessa Bergmark met with Nolan and Nunemacher in 2022 to discuss a merger between the two agencies, as well as “other parties,” according to the suit. Bergmark told The Real Deal she could not disclose the other parties, but said they were other independents that were interested in the possible merger as well.

In 2023, the parties all signed a non-disclosure agreement, which also included a non-solitication agreement that stated that the confidential information released as part of the talks would not be used to get employees or customers of each others’ firms.

After the NDA was signed, Red Oak released a “treasure trove of sensitive financial documents and other confidential information” over dozens of in-person meetings and Zoom calls, according to the suit, including details on its commission splits, listings, agent fees, income statements, human resources reports and tenure of its agents, “having been assured that such disclosures would be safe by virtue of the NDA.”

“Red Oak provided a fully transparent window into its inner operations, since doing so was necessary in negotiations where the parties were trying to determine ownership structure, equity split, compensation and other details attendant to forming a new entity,” the injunction complaint reads.

The merger did not go through because the parties couldn’t reach an agreement on equity splits and leadership roles, and because Red Oak had “concerns with Vanguard’s spending patterns and what it perceived as its exorbitant expenses,” according to the suit.

Bergmark said she could not give more details without violating the NDA herself, but said she felt the merger talks ended on an amiable note. When Vanguard opened an office across the street from a Red Oak office in Oakland this summer, she said she welcomed the fellow independent to the city.

“Just because it wasn’t a fit for me to partner with them, now you’ve got to stay out of my area? Of course not,” she said. “This still makes sense for you. Welcome to town if you’re going to be building out your company here.”

Sour relationship

But things took a marked change this fall, she said, when she returned from an October trip to discover that several of her top producers had abruptly decided to decamp for Vanguard after decades of working under the Red Oak banner.

“It was ridiculous,” she said. “It would be like your spouse walking in after 30 years of marriage and being like, ‘The Uber is outside and we’re getting a divorce and I’m actually packed and I’m going.’ And you’re like, ‘Wait, what?’”

Filing the suit was a “hard step,” she said, especially because she felt the firms had developed a close and collegial relationship over the last decade or so.

“I have to say, this seems very out of character for them,” she said. “I didn’t play in their backyards, and I don’t know their reputation in San Francisco and whatnot, but this is sort of stunning to me.”

When she found out that Vanguard, allegedly led by Hoffman, was asking former Red Oak agents to cancel sales already in contract and relist them, as the suit claims, that was the deciding factor to move forward with a legal case, she said.

“I have absolute proof, and I will take them to the mat on that, that they have said, ‘Cancel these contracts and relist them with us,’” she said. “That was the moment when I was like, this is just a downright dirty practice that’s also putting the agents in jeopardy.”

Vanguard said in its statement that the company is “founded on class, integrity, kindness and professionalism, setting the standard for the region.” It added that the agency had experienced “remarkable growth” in the East Bay because it filled a gap in the market, “offering an upscale brokerage with decades of time-tested support for its agents, and fostering a culture of care and belonging that is increasingly rare.”

Court dates

Supman, Vanguard’s general counsel, told The Real Deal that she could not add any more details at this time, but that she expected the company to file a detailed response with specific contentions and oppositions to the injunction and the demand for damages in mid-January, and would have more specific rebuttals to the claims at that time.

Bergmark said there is more to come from her side as well, including determining a dollar value for the damages and the possibility of naming some of the “Does 1-25” listed as co-defendants in the suit.

A hearing on the injunction is currently set for Jan. 27 and a case management conference is scheduled for May 7, according to court documents.

No matter the short-term outcome in court, Bergmark said she can already see a long-term silver lining.

“Even though this is a bit of a loss and a bit of sting, they’re not my business partners, and that I’m very grateful for,” she said.